Bankruptcy Litigation may take many forms, and will come from either a Creditor, Trustee or the Debtor. All forms of Bankruptcy Litigation will either be conducted by a Contested Matter or Adversary Proceeding.
Litigation occurs in the Bankruptcy Court most often when a creditor or collector disputes the dischargeability of a specific debt pursuant to 11 U.S.C. 523.
There are 18 varieties of non-dischargeable debt. Fifteen of these types of debt are automatic and do not require litigation most of the time to establish that they are non-dischargeable: Student Loans, Domestic Support Obligation, Certain Taxes, Post-Petition HOA Fees etc.
Three types of debt require litigation. These are debts that arise through Fraud, Embezzlement or Theft, and Malice.
The Trustee, in a Chapter 7 and sometimes Chapter 11 case, is entrusted with maintaining the assets of the estate and as such sometimes must sue to maintain those assets. The Trustee most often sues to recover or preserve these assets.
The Debtor, or filing party, also has the ability to initiate complaints against parties in the Bankruptcy for a variety of reasons.
Disputes in Bankruptcy Court can be settled by Contested Matters or Adversary Proceedings.
Contested Matters are designed for “smaller” issues, or nominally issues that will take less time to resolve than an Adversary Proceeding. A Contested Matter is generally resolved within 45 days and is initiated when one party files a document called a Motion. A Motion is a legal document requesting that the court make, approve or grant permission on behalf of some type of action.
An opposing party, or parties, who believes, rightly or wrongly, that they have some basis to oppose that action may file an Opposition, or responding document, in the court. The Moving Party who filed the Motion may, at that point, file a Reply, or response to the Opposition, before the hearing (if any).
Contested Matters in Bankruptcy Court may necessitate a Hearing, or appearance before the judge, or may simply require that all parties have the opportunity to oppose the Contested Matter. It depends on the nature of the Contested Matter. There are a great many Motions that are filed in Bankruptcy Court that do not necessitate any response from any party.
Once a Contested Matter is resolved, an order is usually prepared by the prevailing party and filed with the court for approval.
Contested Matters are addressed by Rule 9014 of the Federal Rules of Bankruptcy Procedure. Districts, and various judges, have different practices regarding how these Contested Matters are resolved.
We litigate cases in Federal Court under the Fair Debt Collection Practices Act and Fair Credit Reporting Act. Also to the extent that we are dealing with an appeal from the United States Bankruptcy Courts to the Federal District Court, we address those cases as well.
Relationship between the Federal District Court and the Federal Bankruptcy Courts: The Federal Bankruptcy courts are ultimately beholden to the Federal District Courts. Federal District Courts are authorized by Article III of the United States Constitution to hear all cases and controversies that arise under the Constitution and laws of the United States of America. Congress, from time time, as authorized by the Constitution, can create other courts to address issues that Congress feels is best addressed by a court system. These types of courts are known as Article I courts. The most well known type of Article I courts are Immigration Courts, Bankruptcy Courts and Tax Courts. (If you need a good Immigration Attorney to operate in the Immigration Courts, give Richard Green a call.)
All Article I court decisions are ultimately reviewable by the Article III district courts.